Economists weigh in on NC’s wrong decision on unemployment insurance

A number of economists and analysts are sharing their assessment of what is really happening in North Carolina’s economy and it isn’t pretty. And contrary to the talking points out there, the decision to drastically reduce unemployment insurance benefits as of July 1 is not improving labor market conditions in our state and could be making it worse.

Labor force declines despite working age population growth is troubling: once people leave the labor force they are unlikely to come back and if they do face significant challenges in making up for lost wages and career mobility lost. And the economy as a whole suffers too when not everyone who can work has a job.

The long-term unemployed face untold financial challenges that extend well beyond once there are jobs available in the economy and they are re-employed too. From lost wages to the erosion of assets and savings to deteroriated health[6], the family and societal costs of unemployment should be mitigated. To do that, a strong unemployment insurance system is needed. This means state policymakers understanding just what is going on in our economy and recognizing the solution lies in strengthening not gutting the unemployment insurance system. And it means federal policymakers recognizing an emergency when we all see it and extending emergency unemployment insurance at the federal level temporarily.

[1] Lawrence Katz, a Harvard economist, analyzed the change in labor conditions from November 2012 to November 2013 and found that 95 percent of the drop in the unemployment rate is from people dropping out of the workforce: http://www.star-telegram.com/2014/01/03/5458806/hagans-senate-measure-on-nc-jobless.html

[3] Andrew Brod, an economist at UNC Greensboro, found in his analysis that if the labor force remained just at the same level as it was in January, the unemployment rate would be 9.5 percent: http://www.heraldsun.com/chherald/cheditorial/x1401031758/Employment-spin

[4] Matt Bruening with Demos Policy Shop debunked the use of the North Carolina case as a reason not to extend unemployment at the federal level by clarifying that the lack of jobs in our state is driving persistent unemployment.: http://www.demos.org/blog/12/30/13/get-economy-capacity-then-cut-long-term-unemployment-benefits

[5] Patrick Conway reports that an estimated 50,000 residents and 12,500 children in North Carolina were NOT pushed into a poverty: http://www.newsobserver.com/2014/01/08/3516646/ncs-disastrous-decisions-on-unemployment.html

[6] From lost wages to the erosion of assets and savings to deteroriated health: http://www.epi.org/multimedia/scarring-effects-long-term-unemployment/